US Economy: Why Are Americans So Angry While Chinese Are Calm - Bloom…
Shuli Ren
5–7 minutes
It was not supposed to turn out this way. The US economy is strong, its labor market is tight, and people are spending. But a large chunk of the society is feeling gloomy. Some are outright angry, saying President Joe Biden’s policies are hurting them. The disconnect between consumer sentiment and economic data continues to vex the White House as we enter the presidential election season.
Across the Pacific, China’s economy is struggling. The property market is in its third year of downturn. Youth unemployment is at 15%. Consumer confidence in their future income is at two-decade low, barring the months when much of China was in a Covid lockdown.
Gloomy? Yes
China's urban households are not confident about their future income
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Source: The People's Bank of China, CEIC Data
Note: The sentiment index shows people's attitude towards their current income. The confidence index is about their future income.
China has no opinion polls, so we don’t know exactly how the population feels. They are probably quite gloomy, as evidenced by record-high savings and the central bank’s quarterly consumer confidence survey. Recent conversations with mainland Chinese that stop by Hong Kong confirm as much. But I do not detect the anger and frustration evident during the Covid-Zero era.
It’s not that Chinese citizens are always docile and Zen. Once in a while, anger spurred by economic insecurity spills over to the public. During the Global Finance Crisis, the government unleashed a 4 trillion yuan ($553 billion) stimulus as waves of factories were shut and wage disputes with migrant workers led to street protests. China abruptly exited Covid-Zero in late 2022 after demonstrations spread like wild fire across the country. You could even argue that soaring inflation was one cause behind the 1989 pro-democracy movement.
A possible explanation for today’s quiet is the benign cost of living in China. While Americans are fed up with high prices, a nagging deflation is giving China’s middle class, and President Xi Jinping, some breathing room.
Everything is cheaper these days, thanks in part to the rise of domestic brands that cater to budget-conscious consumers. Miniso Group Holding Ltd., which opened its first retail store in 2013, sells everything from cosmetics to home decor heavily influenced by Japanese design. As of 2022, over 95% of its products were priced under $7. Or consider how one gets caffeinated in the morning. Instead of going to Starbucks Corp., one can stop by Luckin Coffee Inc., where customers can buy a latte or an americano for just $1.40.
Angry? Perhaps Not
Cost of living, including the cost of borrowing, is lower
Source: Bloomberg
Travel paints a similar picture. Young people have become the dominant force in this industry, taking advantage of their free time since there are few good jobs out there anyhow. With tighter budgets, they are not going overseas. Instead, they are exploring hidden paths, where one yuan goes a long way. This year alone, they have enjoyed the ice and snow show in northern China and spicy skewers in the northwest, where a satisfying meal costs only about $2.80.
Travel data from the golden week holiday earlier this month showcases this trend. The number of tourists is 28% higher than the 2019 level, but spending per visitor is 11% lower. While domestic flights have surpassed pre-pandemic levels, international routes are still lagging behind. But are young people having less fun, just because they no longer roam around overseas? I doubt it.
It’s not just the price of goods and services. Unlike economists, consumers may also consider the cost of borrowing money as part of their cost of living. On average, households nowadays pay 3.7% on their mortgages, down from 5.6% in 2021: Banks have been slashing borrowing costs, worried that homeowners would otherwise turn over the keys and default. Meanwhile, for those who have seen China’s yo-yo years, customer service everywhere has gotten so much better, as business owners jostle for good online reviews and foot traffic.
China’s work culture is also starting to change. Tens of millions of young people are choosing to take a gap year or two. They live with their parents and proudly label themselves “professional children.” Last week, a tech executive’s online videos laying out her unapologetically tyrannical management style earned her the pink slip. This would have been unthinkable just a few years back. But then it also makes economic sense. Since hard-charging tech companies can no longer make sizeable profits and offer big bonuses, they can’t expect employees to work “996” hours either.
These are just a few examples to show the resilient part of the Chinese economy. Yes, the bigger growth engine has slowed, but the middle class can still enjoy discretionary consumption without breaking the bank. People can kick back and start to enjoy the little pleasures in life. As Biden and Xi are both finding out, cost of living matters.
